GM Financial plans to offer $709 million of securities backed by a pool of retail closed-end vehicle lease made to prime and non-prime borrowers, according to Fitch Ratings.
The pool is comprised of leases that finance new General Motors (GM)-affiliated brand vehicles acquired by GM Financial (GMF) directly from dealers. GM Financial Auto Leasing Trust 2014-2 is the issuer's second-ever public auto lease ABS issuance.
The 2014-2 features a lower weighed average FICO score than the issuer's previous deal, completed in April: 721 compared with 728 in the 2014-1 transaction. The pool also contains the highest concentration of FICO scores below 650 of any previous GM deal, either publicly or privately offered, at 21.5%.
“Relative to other non-luxury prime ABS lease issuances thus far in 2014, GMALT 2014-2 displays the lowest credit quality on a WA basis,” according to the Fitch presale report.
Cars also feature less heavily in the latest pool. The 2014-2 has a larger concentration of cross-over sports utility vehicles, which make-up 50% of the pool. The risk here is that “a materially higher portion of the portfolio is prone to fuel-price fluctuations” according to the presale report.
However the latest deal features a material decrease in the undiscounted base residual value (RV) to 65.84% of the securitization value (SV), which is below that of recent transactions. Lower RV composition means the collateral pool will be subject to less RV risk. “This risk factor is directly reflected in cash flow results, as a smaller initial residual composition will subject a smaller portion of cash flows to RV stresses,” explained Fitch.
The capital structure features $95 million of short-dated, money market fund notes rated F1+’. Also offered are a $539 million of three-year class A notes that are rated AAA’.
At the junior level are $29.8 million of class B notes, rated AA’, $23.25 million of class C notes rated A’ and $21.7 million of class D notes rated BBB’.
JP Morgan and Deutsche Bank are lead underwriters.
